Private equity (PE) sponsors, long known for their lean management teams and focus on financial engineering playbooks, are now sharpening their competitive edge by looking more closely at the portfolio c-suite and prioritizing legal, regulatory and reputational value. The traditional executive trio of CEO, CFO and COO is no longer seen as sufficient. Increasingly, PE firms that we work with see growing value in a senior lawyer having a place at that table.
In a complex and fast-moving global risk and regulatory environment, they recognize that senior legal expertise can bring real benefits to portfolio company executive teams throughout the investment lifecycle.
Strategic value creation and risk mitigation
PE firms increasingly see the strategic edge that adding a general counsel (GC) brings to portfolio leadership. Peter Banks, A&O Shearman’s Co-Head of Private Equity for Europe, says: “GCs are increasingly recognized as strategic partners, not just legal advisers, capable of looking beyond the day-to-day and playing a pivotal role in value creation, risk assessment and driving ambitious growth strategies.”
A senior legal voice can be transformative, shaping a company’s trajectory and guiding the management team through the legal complexities of the investment lifecycle, from buyout to exit. A GC’s ability to identify, mitigate and manage risk is key for businesses seeking to pull on multiple value creation levers against a backdrop of macroeconomic and geopolitical uncertainty.
Navigating complex regulation and ownership
All businesses are under greater scrutiny, but those operating in regulated industries like healthcare, pharmaceuticals, finance, energy, transport, food or telecoms even more so. As PE expands in sectors that face oversight by government agencies and other regulatory bodies, the need for board-level support to comply and meet reporting obligations is growing.
Operating in a regulated environment creates both challenges and opportunities for businesses and a well-established GC can act as a valuable intermediary, liaising with policymakers and regulators to advance a company’s interests.
Further, with the growing prevalence of multiple sponsors in investments, GCs can help align diverse stakeholders and make sure companies meet obligations in complex ownership environments. Jenny Paramonova, Senior Associate in A&O Shearman’s PE group, says: “GCs can act as translators between the portfolio company and external counsel, as well as between the portfolio company and its sponsors.”
M&A and exit readiness
GCs are also central to navigating private M&A, IPOs and other exits, often on a cross-border basis, bringing the legal expertise and project management skills to execute high-stakes deals. This is especially important for PE firms seeking to grow through bolt-ons, a strategy being used even more in a challenging exit environment with lengthening hold periods.
A senior legal professional can add particular value where transactions come with additional complexity and require more sophisticated structuring. Banks says this is especially the case today, when we see earn-outs, licensing arrangements and hybrid capital all being deployed by PE firms, calling for an elevated legal input. Having someone on the team that can oversee the targeted and streamlined use of external counsel can also make processes more efficient and reduce costs.
An expanding remit
The modern GC’s responsibilities typically now reach beyond traditional legal functions, touching governance, ESG, reputational risk, executive compensation and more. A recent report by Thomson Reuters notes the future-focused GC no longer advises just on whether something is legal, but offers “counsel on whether decisions are legal, strategic, and right”.
With a unique perspective across the whole business, and an understanding of everything from AI and data protection to employment rights and environmental litigation risks, GCs can be seen as the moral compass of an organization and the authority on risk.
When resources are tight, in-house lawyers have been under pressure to be more than a cost center in their businesses, renowned for saying no. Paramonova says, “Today’s GCs use their analytical skills to help create more resilient companies and provide innovative, cost-effective solutions to organizational challenges, including through thoughtful integration of legal tech tools”.
By bridging legal, commercial and operational priorities and staying abreast of market shifts, their high-level perspective is far better appreciated than it was in the past.
Legal as a competitive advantage
We are witnessing early and experienced legal leadership delivering a competitive advantage to fast-growing companies. PE-backed businesses are investing in seasoned GCs early on, in recognition of how robust in-house legal guidance can enhance creditability, support effective scaling and reduce reliance on costly external counsel.
Similarly, the decision to bring in a senior lawyer to support the executive team early on in exit preparations can make those processes far more effective.
How we can help
At Peerpoint, we can help PE firms fill interim GC positions in portfolio companies, either immediately post-acquisition or in the run-up to exit. We understand that sponsors need business-minded, commercial lawyers that can help drive an organization forward.
All Peerpoint lawyers have previously worked in top-tier law firms or equivalent in-house roles and their experience and leadership credentials are personally endorsed by the most senior A&O Shearman lawyers.
Many senior legal professionals are now choosing to work differently, bringing their deep insights to growth companies on a six or 12-month basis and bolstering executive teams with working arrangements that meet the specific needs of a particular business.
